Banker's "kites" plummet

DIE HARD III
Herman Tiu Laurel
8/22/2007



The Philippine stock market lost 25% the past month, edgy on memories of its 50-60% crash in 1987 and 1989. Manila followed the recent U.S. subprime market fall which caused Wall Street stocks to tumble and lose $ 1.1-T (yes, trillion). It hit worldwide: Dalal St. in Mumbai, India lost R1.7-T; Japan’s early losses, $ 20-B but the Bank of Japan pumped Y 1-T credit; the European Central Bank pumped out E61.05-B for trouble Euro markets; the Australian Reserve Bank pumped in A$4.05-B, to cite a few. Companies bled: Philamlife parent AIG lost $2.5-B; BNP Paribas, € 2-B; Bear Stearns lost $ 1.2-B and filed bankruptcy; Commerzbank, $ 70-B; UK’s SilverStreet Capital $ 130-B.

U.S. Federal Reserve Chairman Ben Bernanke is quoted to estimate losses at $ 100-B but that’s gross underestimation. Total damage will be known only eighteen months later, financial companies are super secretive about their accounts. Panic ruled as the dot.com crash in 2000 was recalled, when U.S. stock markets lost about $ 6-T in a few days. The “markets” simmered down only after the U.S. Federal Reserve’s Ben Bernanke cut interest rates by 0.5 percentage points. Life for ordinary people again went on as usual. But things won’t always be this way; next time as in the Great Depression of the 30s, as much as 50% of the world’s jobs may be lost in the final crash of the system.

The real solution is: let the bubbles blow and bankers sink, direct credit to save small investors and productive companies. But no, the U.S. Federal Reserve pumps more credit to the bankers, which is only blowing more air to lift the bankers’ “kiting” – i.e. that old game of paying a cheque with another cheque with another cheque in a perpetual circle without having to actually pay cash at any time while the final payment in cash or kind is not called. In the global financial markets the cheque in the kiting game is replaced by all sorts of other financial instruments, like real estate mortgages, stock and money market futures, etc.

An Internet article describes the crisis: “The Debt Culture Gone Awry”, infecting but most seriously the U.S.A. where banks prod consumers to use credit cards to put down payment a house and the house as collateral to buy a second house which is used to back up credit card purchases of anything from cars to iPhones. The bankers are only too happy to keep the debt culture growing just as they did before the dot.com collapse in 2000 lending to consumers to buy stocks. To earn again after the dot.com crash bankers conjured this subprime lending to start a new pyramiding of new debt and earning unimaginable book profits as the pyramid grew.

Bankers and speculators feeding on bubbles saw more opportunity in cheap Japanese credit at less than one percent interest. In what is called the Yen carry trade speculators borrow Yen to play it in the stock market and real estate casino, feeding the bubble even more. When the real estate bubble threatened to blow the other bubbles shivered, then they pleaded for US Federal Reserve money - which is nothing more than “credit” or “virtual money” the U.S. government promises to redeem someday. The banks get new credit to turn around and lend to investors in the “markets” again, making the bubble bigger than ever before.

Sooner or later it will finally blow and the US will default, disguising it under another name like Nixon in 1971 “decoupling the US Dollar from gold” in 1971” – or war; or both, as in World War II. Governments, like the U.S. government, will take it upon itself to solve the problems as they did for the 1930s Great Depression but, in truth, it is private bankers at fault. The U.S. Federal Reserve absorbs the blame, but it is really not a government bank but a private bank - owned mainly by Jewish financial families and mafias. Confusing? Deliberately so, and calling the Reserve “Federal” is the biggest deception of all.

Any entity dependent on U.S. Federal Reserve decisions, be it the US Congress or Bangko Sentral ng Pilipinas, is ultimately manipulated by the Jewish financial interest – hence the inordinate power of miniscule Israel over world politics. They can crash the countries in the world that allows its money to be subject to Federal Reserve whims, as Bernanke said to the Federal Reserve Board on November 2002 on the ultra-neo-liberal economics guru Milton Friedman’s birthday, " Regarding the Great Depression. You're right, we did it. We're very sorry. But … we won't do it again."

But Bernanke can’t stop doing it again, because the present financial system directed from Wall Street thrives on bubbles – and the rest of us, especially the developing world suffer as credit goes to bankers and speculators to fly kites and feed bubbles, while world development projects vital to real global growth is denied. In a better world and a better country, as in many South America countries today or the New Republic of Rizalia we envision, credit creation shall not be by control for, by and of the bankers-speculators to fly their own kites and feed their bubbles’; credit will be for, of and by the people for real industries and jobs generation.

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